The year 2015 will do down as another year in which stubborn gold bugs were wrong again.
And the shameful scare tactics employed by bullion peddlers along with their hyper-aggressive predictions of gold at $5,000 per ounce and beyond, are grossly untruthful about the real-time trend in precious metals prices.
The ETFS Precious Metals Basket Shares (GLTR), which owns gold, silver, platinum, and palladium is down almost 14% year-to-date and is badly underperforming virtually all major asset classes like U.S. and developed market stocks, U.S. Treasuries (IEF), global real estate (RWO) and cash.
The SPDR Gold Shares (GLD), the globe’s largest ETF with more than $22 billion in assets, has lost 37% since its August 2011 peak. During that same period the SPDR S&P 500 ETF (SPY) has gained 63% and the Vanguard Total U.S. Bond Market ETF (BND) is almost flat.
To say that precious metals have been dead money is an understatement. And with gold now on the verge of breaking below $1,000 per ounce – a threshold that would take it back to 2009 levels – another episode of fierce selling could easily kick in once Wall Street’s algorithms get fired up.
Should precious metals still be used as the “safe money” portion of a client’s investments?
From a portfolio construction viewpoint, this popular view is a fundamental mistake. Why? Because price fluctuations and the potential for market losses make precious metals an unsuitable choice for the “safe haven” portion of a person’s portfolio. In contrast, only assets that guarantee principal or don’t lose market value should be used for the safe money portion of a person’s investments.